Genting Hong Kong

Genting Hong Kong (GENHK): is buying Crystal Cruises, including its vessels Crystal Symphony and Crystal Serenity for a consideration of US$550m.

Crystal Cruises is the leading luxury cruise line, and has been awarded the “World’s Best Cruise Ship” for 21 out of 22 years by Condé Nast Traveller since 1992. Other accolades include “World’s Best” Large Ship Cruise Line for 19 years in a row, and “Best Luxury Cruise Line” by Virtuoso.

There could be a potential addition of a third new vessel for the Crystal Cruise brand, post-acquisition, which bodes well for the brand as loyal customers have been asking for a fleet expansion for some time.

The acquisition is expected to complete in 2Q15, and the final acquisition price is subject to a few adjustment items, but the consideration price should not be more than US$600m.

The acquisition prices the deal at 14x EV/EBITDA, based on Crystal Cruises’ FYMar14 EBITDA before charterage of US$39.4m. The replacement cost value for the Symphony and Serenity vessels are US$120m and US$180m respectively.

GENHK will fund the purchase via cash and any required borrowings. The acquisition, and the potential addition of another vessel should be comfortably funded given their current net cash position of US$443m.

Trading at 0.9x P/B, GENHK’s valuations are undemanding, with the market value of its 25.4% stake in Norwegian Cruise Lines (NCL) of US$2.9b on par with its current market cap, which means that GENHK’s other businesses comes for free.